Seeds of Change - E-News Winter 2007 In this issue: Gates Foundation Dilemma - There is an Answer Starbucks going growth hormone-free! Shareholders Challenge Verizon and AT&T on Privacy Home Depot and Monsanto to Disclose Political Contributions From the Press Room Moving Apparel Industry on Sweatshops Support As You Sow! There is no foundation that has done more to prod, push and inspire foundations [to be active shareholders] than AYS. Timothy Smith Senior Vice President Walden Asset Management Gates Foundation Dilemma - There is an Answer Recent LA Times news articles have cast a critical light on the investment policies of the Gates Foundation and their apparent contradiction with the foundation's mission. In one of many examples, the articles examine how the Gates Foundation investments in the petroleum corporation Eni support Nigerian operations causing "an epidemic of bronchitis in adults, and asthma and blurred vision in children" even as the foundation seeks to improve health care in those same locations. After initially suggesting they would review their investments the foundation has quickly stepped back from that suggestion. With an over $60 billion endowment, the Gates Foundation plays an enormous role in the foundation community and the investment community at large. Shouldn't foundations use their entire endowment in support of their mission? We call it the 95% Solution. As noted by one post on Philanthropy 2173: Investments that exacerbate social ills - whether hunger, sickness or environmental damage - all carry hard-dollar costs that can be estimated… So the foundation boards and investment officers are free-riding on others' burdens. More than that, they may actually be creating additional burden - not just ignoring status quo - that creates hard-dollar costs for others. Foundations are not investing dollars for benefit of a client in the way hedge fund managers are. They are investing for a return for the public trust, which has agreed to shelter this wealth from tax exposure on the condition that the wealth be used to improve the human condition. A rich set of options exist for foundations to align their investments with their mission from screening and mission-related investing, to proxy voting and shareholder activism. Foundations like the Educational Foundation of America are showing that these strategies are increase mission impact and improve returns. Read our letter to the Gates Foundation. Letter to Gates Foundation Q&A with SRI expert Thomas Van Dyck (Grist.org) Dark cloud over good works of Gates Foundation (LA Times) Meshing Proxy With Mission (Chronicle of Philanthropy) Gates Foundation faces multibillion-dollar dilemma (Seattle Times) Outrageous Behavior by The Gates Foundation (A. Fine Blog) Starbucks going growth hormone-free! Starbucks is eliminating bovine growth hormone (rGBH) nation-wide and has already started doing so regionally! As You Sow initiated and led dialogues with Starbucks since 2001 representing a shareholder coalition that encouraged the retailer to eliminate the genetically engineered growth hormone. Banned in Europe and Canada for safety concerns, the hormone increases the milk production but also disease in cows and is linked to human health risk as well. The Consumer's Union has asserted that there are significant health concerns and that the FDA's testing is inadequate. We applaud Starbucks responding to shareholders and taking this important step to safeguard consumers' health. Learn more Shareholders Challenge Verizon and AT&T on Privacy Press Release AT&T Resolution Verizon Resolution Shareholders' Letter to AT&T Shareholders' Letter to Verizon Take Action! As You Sow continues its challenge of telecommunications companies on their reported data sharing with the NSA. This month on behalf of shareholders holding 2.4 million shares of AT&T we submitted a shareholder letter to the company expressing our concern regarding consumer privacy protection. We also filed a similar resolution and letter with Verizon. Partners include Amalgamated Bank, Calvert Group, Walden Asset Management, Domini Social Investments, Adrian Dominican Sisters, Trillium Asset Management, and Harrington Investments. Both telecommunications companies are arguing that the SEC should disallow these resolutions due to "state secrets", an argument typically reserved only for the federal government. As You Sow has submitted a vigorous defense of the resolutions and we believe the law is quite clear that shareholders should be allowed to vote on them. Listen to Program Director Conrad MacKerron discuss the issues on Corporate Watchdog Radio. Home Depot and Monsanto to Disclose Political Contributions As You Sow and its shareholder partners Green Century Funds and Adrian Dominicans filed resolutions with Home Depot and Monsanto for disclosure of their political contributions. In response to these filings both companies committed to disclosure of their policies and contributions and we withdrew our resolutions. This is an important step forward. Under current political donation disclosure rules, companies are not required to report political donations and many boards of directors conduct little serious oversight of these expenditures. Only political contribution recipients must report them. This makes it difficult for shareholders to learn about or track these expenditures. Last year, progress was made with ExxonMobil but their disclosures are incomplete and As You Sow has again filed a resolution to push for greater transparency. For our full list of resolutions, go here. From the Press Room We were pleased to be referenced in the Wall Street Journal's Jan 19 article "Foundations Test Proxy Power" discussing foundations and proxy voting. InformationWeek offered an excellent article this month on telecommunications companies and privacy concerns, including our resolution. Our report on beverage companies' poor recycling efforts is still getting attention with a citation in EthicalCorp's BrandWatch. We even received a nod from FOX News.com which devoted a whole column to As You Sow. Ok, this article is inaccurate and not intended as flattery but we are glad our work is receiving attention, and given the source we take it as a sign of success! Our work reducing toxics with the California Safe Drinking Water and Toxic Enforcement Act has led to reductions in toxics in thousands of products. There is an elaborate process under the act for identifying chemicals that are a genuine hazard. As You Sow does further testing to establish whether exposure levels are of concern and of course the final evaluation comes from judges who weigh the evidence. This stringent process ensures that the citizen enforcement approach works in areas of genuine concern to protect public health. Moving Apparel Industry on Sweatshops We are building on our successes getting individual retailers to address poor working conditions in factories. Many leaders of social research and investment firms are asking how retailers compare. This year As You Sow will do a cutting edge survey to begin making that comparison possible across the whole sector. The problems in the industry remain very wide spread, possibly even increasing. BusinessWeek recently noted violations across many industries and with increasing rates of falsified records. This survey which would include retailers such as J. Crew, Old Navy, The Limited and others will compare size, nature and budget of their auditing systems. These auditing systems are an essential element for improving factory conditions. The prospects for improvements for workers around the world is enormous. The Gap alone is supplied by approximately 2,500 factories with some 12 million workers. As You Sow's concrete analysis will bring additional improvements for workers world-wide and builds on existing work. Our efforts to bring innovative approaches to China with McDonald and Disney continue with Project Kaleidoscope and we are working on sector frameworks in the electronics industry through the Electronics Industry Code of Conduct.